SC rejects the plea for spectrum license extension, says corporate houses know the tactics of ROI

By May 15th, 2015 AT 1:46 PM

supreme courtThe Supreme Court rejected the pleas submitted by telecom companies, including Vodafone and Bharti Airtel seeking extension to their 2G spectrum licenses for next 10 years. The Court observed that there is no merit involved in extension.

“The impugned decision of the government, which in fact resulted in huge inflow of revenue in the auctions conducted during the pendency of this litigation, cannot be said to be a totally irrational or irrelevant consideration in the context of the spectrum management, more particularly, in the light of decision of this court in 2G case,” a bench of justices J. Chelameswar and R. K. Agrawal said.

The Court stated that it respects the wisdom of Government to choose the most suitable method (auction) of distribution of natural resources. It further noted that the companies are ‘not’ compelled to pay any specific tariffs fixed by Government for availing the right to use spectrum.

“If the price for securing allocation of spectrum is likely to go up because of the procedure of auctioning to have access to spectrum, it goes up because of the market forces. Because there are people who are willing to acquire such a right paying a higher price on the assessment that they would be able to carry on the business profitably even after paying higher amounts for acquisition of spectrum.” Court said.

The apex Court further observed that the licensees are corporate houses, with enormous economic power, who knows the right financial planning. They would not make any investments without reasonable assessments that they would be able to run the business profitably even after spending higher cost for spectrum acquisition.

Telecom players such as Bharti Airtel, Idea Cellular, Vodafone Mobile Services and Loop Mobile India submitted the petition to the Court when the Government rejected their applications for license extension. The Government ordered for auctioning the spectrum surrendered by them.

They argued that the terms and conditions mentioned in their 20-year licenses stated a clause that ‘they may extendable by another 10 years’. Government rejected this argument stating that the licenses ‘may’ be extendable, hence, the matter is at its discretion. The telecom players even sought a stay on the auction.

Supreme Court rejected this plea for stay on March 23rd, but agreed to hear their case. The Court supported the Government’s view that the companies should participate the auction without prejudice.

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